As the focus of UK contractors and the wider related business community turns to early 2018 and the planned IR35 consultation, a petition urging the Government to scrap plans for further IR35 reform altogether has surpassed 13,000 signatures at the time of writing.
The petition, created by one Ian Michael Kendrick, claims The Chancellor is not simply considering extending IR35 legislation changes to the private sector, but planning it “in an attempt to equalise the payments and tax regimes between contractors and permanent employees.”
And many contractors might well agree with Mr Kendrick’s opinion that the Government are not merely thinking about further reform – because that would be an understatement.
Thousands believe it quite possible that The Chancellor is hoping to make an announcement with regards to reform in 2018, despite clear and continued calls not to do so from the very individuals and businesses which would be impacted by it.
When pressed on the possibility of further reform in the past, the Government has remained tight lipped, and has failed time and time again to disclose anything of real substance for anyone to take away. Inevitably this has been a catalyst for sector worry and uncertainty.
Disclosing plans to hold an IR35 consultation was widely welcomed by contractors and the private sector. But more for the fact it meant potential changes were delayed for the time being, not scrapped indefinitely.
The Government’s recent response to the IR35 petition doesn’t offer much more insight into its current line of thinking either. Put politely, it’s a regurgitation of previous material which – judging by ongoing speculation – has once again failed to serve its purpose.
Predictably, the statement in relation to the IR35 petition covers the same old ground. Public sector reform is working. Contractors are now paying the correct tax. A possible move would be to extend reform into the private sector. When will the Government official take the time and care to discuss the IR35 legislation in detail and openly with the people and businesses it is impacting? If the failings of recent public sector reform are anything to go by, it’s clear they would benefit.
And this is where much of the problem lies. Despite a consultation on the horizon, the public has once again been left in limbo with regards to the future of IR35. Because of this, speculation and concern surrounding private sector reform will simply increase.
One might hope that an issue impacting 5.5m private sector businesses, including 2m contractors and the entire recruitment industry deserves more than a few of lines in the Red Book and what looks like a copy and pasted response.
In reaction to the petition, the Government once again cite what they believe the true cost of tax avoidance in the private sector will one day amount to, first disclosed by Financial Secretary to the Treasury, Mel Stride, in response to a written question put forward by a Conservative MP.
“The cost of non-compliance in the private sector is still growing and will cost taxpayers £1.2 billion a year by 2022/23.”
However, the accuracy of this figure remains to be seen. And given the chaos that surrounded recent IR35 changes, you do wonder whether the long-term cost of private sector reform would fall in under the Government’s estimation of non-compliance.
Despite all of this, 63% of contractors believe potential private sector reform could be managed, according to a survey conducted by Qdos Contractor. That said, it wouldn’t stop one in three from considering employment. Given the UK’s independent workforce contributed over £119bn to the economy last year, you can’t help but think that private sector reform would be a short-sighted move.
While IR35 changes are widely predicted in due course, typically it looks to be a case of wait and see. Although, there will no doubt be some kind of announcement following the consultation early next year.
Needing 100,000 signatures until the issue is considered for debate in Parliament, the IR35 petition must build up some momentum quickly if it is to have any real say on proceedings. You can sign the petition here.